Over the past decade, there has been a boom in bourbon sales (John's Kentucky relatives rejoice!). The demand increase has driven an increase in prices and move toward substitutes, like single-malt scotch. Unfortunately for scotch substituters, the long-time attraction of scotch has been its long aging process and rare commodity status, causing inelastic supply of scotch (it is difficult to ramp up production in response to demand increases, resulting in little response in quantity supplied to price increases). The result is rapid increases in the price of scotch, with little increase in the quantity supplied in the short-run.
Thirst for the liquor is booming around the world -- from the U.S. to developing countries like China -- pushing prices of older vintages through the roof, attracting savvy investors hoping to cash in and forcing distilleries to scramble to meet demand.
"The shortage of old and rare single malt ... has already started, and it's going to get worse," said Rickesh Kishnani, who launched the world's first whisky investment fund.The problem is that age-labeled single malt Scotch has always been, by design, a limited commodity. Distillers produce a set amount in a given year with pretty much zero visibility about what demand will be like when the bottles start hitting venerable ages.
The industry woke up to the current boom too late. In the late 1980s, many distilleries were going out of business, and just a decade ago, Scotch exports were stagnating.
More capacity is being added now, but the bad news for whisky drinkers is the shortage could last another 10 to 15 years, experts say.
For the record, I am a Bourbon drinker. Always have been (when I'm not drinking beer)--since, well, I'll keep that to myself in case my kids are reading.
And I like to keep it simple: Jim Beam and Jack Daniels do just fine. Especially when mixed with ginger ale or Coke. Sure I will drink the niche-stuff (small batch) if someone else is buying--Knob Creek is yummy.
And yes, I know Jack Daniels is technically a Tennessee whiskey and not Bourbon, but that difference is the same as the difference between 'soda' and 'pop.' Same product, different name.
And Scotch is un-American.
Literally.
Just sayin'.